Al-Rawas v Pegasus Energy Ltd & Ors

Damages under a cross-undertaking are assessed on the contractual basis, applying ordinary principles of causation, remoteness and mitigation. The court may award general and aggravated damages for the consequences of a wrongly obtained search and seizure order or freezing order, but an award requires evidence or circumstances sufficient to justify it. Emotional distress is generally not recoverable, save in exceptional circumstances. Management time is recoverable where diversion and significant business disruption are established, although the court may make a fair estimate where the evidence separates recoverable work from irrecoverable litigation work. A prescribed undertaking covers compensatory damages only, unless its wording separately extends to misconduct in execution; it does not ordinarily permit exemplary damages for misrepresentation used to obtain the order.

The claimant obtained an English search and seizure order under section 25 of the Civil Jurisdiction and Judgments Act 1982 and later a worldwide freezing order in support of proceedings in Mauritius. Both orders were discharged by Ramsay J because the underlying case was insufficiently strong, the necessary risks had not been established, and there had been serious material non-disclosure. The Court of Appeal refused permission to appeal.

The defendants then pursued inquiries under the claimant’s cross-undertakings. The issues were the recoverability and amount of management-time losses, general and aggravated damages for reputational harm, inconvenience and distress, and exemplary damages.

1. Cross-undertaking. The inquiry proceeded on the assumption that the undertakings were enforceable. Damages were assessed as they would be for breach of a contract not to interfere with the defendants’ premises, documents, assets and banking arrangements. Ordinary contractual principles of causation, remoteness and mitigation applied.
2. Management time. The authorities required the fact and extent of diverted staff time, and significant business disruption, to be established. Where those matters were shown, the court could infer that the time would otherwise have generated revenue. The scale and duration of the search established serious disruption at the two offices. A fair estimate was made for Mr Lloyd’s recoverable time, excluding time spent on litigation, while inadequately supported claims were rejected.
3. General and aggravated damages. General damages were available for consequences of the orders that could not be claimed as special damage. Evidence was normally required, although the circumstances could themselves make an award appropriate. Emotional-distress damages were generally unavailable under a cross-undertaking except in exceptional cases. The prolonged invasion of the two offices justified general and aggravated damages, the latter because the orders had been obtained by intentional concealment of a material matter.
4. Freezing order. The evidence did not establish material effects on most defendants during the order’s 48-hour operation. Mr Lloyd received £1,000, including aggravated damages. No wider award was made.
5. Exemplary damages. The wording of the prescribed search-and-seizure undertaking distinguished compensatory damages from damages for misconduct in execution. It therefore covered compensatory damages only, except where the order was executed in breach of its terms or inconsistently with solicitors’ duties as officers of the court. Misrepresentation in obtaining the order did not fall within the second sentence. The freezing-order undertaking likewise covered compensation only. Exemplary damages were therefore unavailable on the facts.

Damages were awarded in the sums identified in the judgment, with the remaining claims rejected or not pursued.

• Court of Appeal: Permission to appeal from Ramsay J’s discharge of the orders was refused on 30 March 2007.
• High Court (Queen’s Bench Division): The damages inquiries were determined by Mr Justice Jack on 8 April 2008.